8 thoughts on “How to invest 101?”

I look at it as an intro for my son (7 years), I thought it was OK but not spectacular.

The production quality is good but I thought they simplified too much.

I don’t think that their analogy of driving over a mountain was necessary either. Working to a numeric goal is concrete enough.

They didn’t touch on just how much of difference taking some risk makes. They could show the dramatic difference between 8% vs. 3% over 20 or 30 years. I think even a kid could understand graphs or just different numbers of years to reach a goal.

Instead of advocating doing research they could have talked about diversification- for example using a safety in number argument.

Finally, they could also have touched on dollar cost averaging and possibly index funds.

Rick Francis,I am not big on the Dollar cost averaging that you mention. I don’t believe it is as useful as buying low,selling high. Or Better Yet, buying or building a business (with the intention of later selling for a profit).Although you do present some other good arguments here. 🙂

If I thought successfully timing the market was possible in the long term I would recommend it… However, the academic research and my personal experience concur that timing the market is very difficult. Have you ever looked back at the historical price data to see how well your trades were timed? If not I would suggest that you do- it may be a very educational experience. I had to conclude that I just couldn’t do it reliably.

I agree that starting a business can definitely earn you far more than investing in another business, however it is also riskier- as the business may fail if you don’t manage it correctly. It’s a lot more work than just investing! I might try it once my kids are a bit older- but I would need to find something that I’m sufficiently passionate about.

One other thing I would add to a basic investment discussion- rebalancing- that is one way to insure that you do buy low and sell high.

Rick Francis,re balancing might be a very effective tool. But you don’t want to just re balance just because your best pick has advanced and now your portfolio looks out of balance. The reason for this is simple, your best pick advanced, but , has it advanced as far as it will go? is it at its true value(as you thought when you researched it?) . re balancing can cause you to sell (early)losing some upside potential of a very fine stock, and the next one you chose might not do as well.

If your top stock is doing well(and causes your portfolio to look out of balance, just keep up with your stop losses (that hopefully you have in place) and sell when it gets stopped out or when it reaches your full assessed value.

Rick, I was not talking about timing the market per se. No one can really time the markets. But, you can make pretty good judgements as to when things might be changing . You might get in a bit ahead of the move,or a bit after the move begins, but , if you’ve done your homework, you should be close and be able to make most of the upside move.But these things are for traders anyway,we aren’t talking about trading ,or at least I am not. I believe in more of a longer term investment.not really buy and hold , but more of a buy and manage thing.